Switzerland’s government has given financial institutions in the country 18 months to embrace ‘open finance’ or face the heightened prospect of mandatory rules.
The Federal Council, which is the country’s highest executive authority, has instructed the Federal Department of Finance (FDF) to submit measures to it by June 2024 ‘in the event that the financial sector does not sufficiently commit to opening up its interfaces’.
Open banking and open finance are being encouraged by governments worldwide, in different ways at different speeds, as a means of boosting innovation and competition in financial services. ‘Open’ refers to open application programming interfaces (APIs), which allow developers – for example, fintech companies – to access proprietary software applications or web services when creating new products.
‘Unlike in other countries, such as the United Kingdom or [27] European Union member states, there is currently no legal obligation in Switzerland for financial institutions to make financial data available to third-party providers at their clients’ request,’ the Federal Council notes in a press release.
‘During a meeting on 16 December, the Federal Council took note of open finance developments in Switzerland and the outlook,’ the press release states. ‘The commitment of industry associations and various financial institutions is to be welcomed. Promising projects have been launched in areas such as retirement provision, portfolio management, payment transactions and multi-banking.’
The Federal Council ‘remains confident’ that a market-based approach can work. But the meeting summary contains a warning that ‘more concrete progress and greater commitment are needed with regard to the opening up of data interfaces.’
Open finance objectives in three areas
Targets in three areas – common standards, open interfaces and ‘scalable solution for third-party access to interfaces’ – have been presented by the FDF.
The finance department is, according to a one-page document (‘Open finance objectives in Switzerland’), focusing on the objectives in order to both boost individuals’ ability to freely use their financial data, including to benefit from new services; and to strengthen the ‘innovative capacity and competitiveness of the Swiss economy and financial centre’.
In terms of common standards, it sets the objective of a maximum of one recommended standard per ‘business area’; that the standards have ‘broad national support’; and that they are internationally compatible ‘where appropriate’.
In terms of open interfaces, the objectives are that interfaces are made accessible (at the client’s request) for all ‘secure’ third-party providers (including other financial institutions); in the ‘main business areas, as a minimum’; where appropriate, not only with a ‘read’ function but also a ‘write’ function; and in a ‘simple way and without unnecessary barriers’. Data should be available in ‘real time’; security and protection of clients and data must be guaranteed; interfaces should are, ‘as far as possible’ be based on common standards; and should cover a ‘large part’ of the market.
In terms of ‘scalable solution for third-party access to interfaces’, the FDF’s objectives are that third-party providers ‘should be able to demonstrate their reliability in an efficient process and at a reasonable cost’; and that access to interfaces should be scalable.
Carrots not enough? Here’s the stick
The Federal Council describes the FDF goals as a ‘guideline for the work to be done’. It states that they are ‘intended to strengthen the digital self-determination of clients and to promote innovation and competition in the Swiss financial centre’.
A Federal Council report released less than a year ago (‘Digital finance: areas of action 2022+’ – February 2022) stipulated that the FDF and State Secretariat for International Finance (SIF) – which organises a quarterly strategy forum on open finance – should ‘regularly review the need for action to promote and expand open finance’.
‘If the progress is deemed insufficient, for example with regard to client and investor interests, the Federal Council shall instruct the FDF/SIF to submit a proposal to it on possible measures, including the examination of a statutory obligation to open up access to data via standardised interfaces,’ the 37-page report – which also looked at areas including cloud computing, RegTech and SupTech, distributed-ledger technology, artificial intelligence and ‘green fintech’ – stated.
The report said the Federal Council ‘expect[ed] the private sector, together with interested stakeholders, to push ahead with the standardisation and opening of interfaces in the various areas’ and that this approach, ‘which may be a little slow at first’, could ‘pay off in the longer term by concentrating investments in the most promising areas… for example, Switzerland is already playing a pioneering role in some open finance areas (for example, custodian bank data).’
The Swiss Bankers Association said it welcomed the FDF targets ‘in principle’ and would ‘continue to work towards achieving them together with members’.
FURTHER READING
Global Government Fintech’s open banking / open finance topic section
‘Open to possibilities: governments bank on opening up financial services data’ – our report on a Global Government Fintech ‘Open Banking and Open Finance: What Role – And Benefits – For Governments?’ webinar, which was held on 15 March 2022
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